Why is there stagnation in farmers’ income?
Why is there stagnation in farmers’ income?
The Budget session 2021 of the Punjab Assembly began on a stormy note with opposition Akali Dal and AAP raising slogans during the address by the Governor, who said the new central farm laws do not address the problem of farmers' "stagnating incomes".
Farmers should ask the right questions for a better future. Let me help through this article.
Before I go into detail, let us keep in mind ultimately either consumers or taxpayer citizens because of the cost of the wrong decisions. No political party or political leader bears the burden of the wrong decision they make for their political gains. Punjab farmers should keep this in mind and ask the right questions to all because they are also important consumers and citizens of India.
There is the scientific as well as the political reason behind the stagnation in income. Let me address both one by one.
Scientific Reason:
Unscientific Swaminathan MSP formula leading to stagnation in farmers’ income because there is no incentive for Quality & Productivity in the formula.
Review the Unscientific and outdated Swaminathan formula of MSP i.e. Cost-Plus Formula without factoring in quality and productivity is bad for the economy and farmers. This defective cost-plus formula only encourages the high cost of production, exploitation of natural resources and incentivise inefficiencies.
In the last 10 years, the wheat farmers’ income increased by 2%, whereas commission agents income increased by 100% due to defective procurement policy in Punjab. Let farmers leaders of Punjab justify this stagnation in productivity and what actions they are taking to reverse this trend.
Let us look at facts from official documents of the Punjab Government:
From the graph, it is very clear that the income of Punjab farmers is stagnant because their productivity is stagnant and their no focus on quality. That is very there is frequent demand by the Punjab government to relax quality standards so that unfit wheat and rice can be sold to the Food Corporation of India (FCI) and ask taxpayers to pay for defective food materials for Public distribution system to feed the poor and vulnerable sections of society., This is a crime against humanity. State governments are dumping their unit grains on people who need food aid.
The fact is the income of Punjab farmers and mainly commission agents in Punjab depend upon taxpayers money which comes from the PDS procurement system. This is making Punjab farmers poor and middlemen rich because of the defective percentage-based commission system in Punjab.
Commission agents and other rent-seekers make more money whenever the government wants to help the farmers. This defective procurement policy and commission system are responsible for the agricultural disaster in Punjab. Unfortunately, there is no discussion on this by protesting farmer leaders and their political masters in the Punjab assembly due to policy reasons.
The demand is to make defective MSP formula mandatory under the law so that exploitation of farmers continues and commission agents continue to make money at the cost of farmers. Is this logical?
Fact Check: Changes in Wheat & Rice Yield and MSP in Punjab:
Important: On the other hand, Punjab claims they are the most advanced marketing system in the country, if this is so, why they need the support of taxpayers money to sell their produce. They should use their capabilities and skills to sell within and outside India.
Why is the income of farmers stagnant in Punjab?
In the current MSP formula, productivity, quality and diversity are not factored in, hence there is stagnation of income and over-exploitation of natural resources like groundwater and soil health. This must be changed at the earliest.
Concern: Is this a sensible formula?
Swaminathan MSP Formula will make organic farmers and efficient low-cost farmers poor and polluting farmers rich and their commission agents.
Swaminathan Formula discourages crop productivity, resource efficiency and product quality. It only talks about the cost of production per unit area and no support encouragement for better productivity and quality. This has resulted in poor productivity means higher the cost of production means higher the MSP. In economic terms, poor management will lead to lower productivity and a higher cost of production means higher MSP.
As per Swaminathan Formula, Organic farmers and Zero budget farmers who are saving the environment, natural resources and giving better quality and safer food will get lower than MSP because their cost of production is low.
Is this a logical formula to consider only of production without factoring in productivity and quality to decide the price, Why Manmohan Singh Ji was not keen to adopt this approach?
Please think it over. Rising MSP without the focus on quality & productivity will destroy Indian agriculture. Traders will start importing various commodities in large quantities. Review Cost based MSP formula suggested by the Swaminathan Committee with a focus on competitiveness by adding quality and productivity as important criteria of income generation.
The way forward is to review the defective MSP formula:
Farmers need better technology to reduce the cost of production to ensure the profitability of the crops. Cost-based without factoring productivity and quality as produced by Swaminathan Committee for MSP and Opaque APMC do not encourage quality and productivity-oriented crop cultivation.
Both should be reviewed to support farmers' income. The government must reconstitute a committee to rectify this defective approach to ensure profitability agriculture. External elements like commission agents will always look at their own income, not what is good for farmers. The best way to support farmers is to hand over all APMCs to farmer bodies and let them run the APMC and decide their own marketing policies and crop cycles.
Let all MPs and MLAs in the country buy PDS ration from the PDS shops in their constituencies at market price, this will ensure quality.
Important: Many may say beyond limit productivity cannot improve, the farmers have to move away from such crops to other crops where profit margins are more. The consumer will always compare the price and will not pay for suppliers limitation. Suppliers have to remain competitive to remain profitable. This is the fundamental of economic prosperity. After many farmers left profitable options and moved to a more profitable option. Look at Punjab itself, Punjab was never a paddy belt, why they are growing paddy now? Why they left their traditional crops? This is entrepreneurship. This is another opportunity to relook at the Punjab agriculture system in place of waiting for taxpayers funding via FCI for prosperity.
Political Reason for farmers crisis in Punjab:
Punjab Farmers leaders and Punjab Political class are not keen to address the issues hurting the farmers’ welfare.
Let us analysis the resolution of Punjab all-party meet passes an of 2nd February’2020:
Besides making remarks on Red Fort incidences, the resolution says the following two things:
The Resolution passed by all-party meeting:
The resolution says: The resolution also called upon the Centre “to make the Minimum Support Price (MSP) a statutory right of the farmers, and continue with the procurement of foodgrains by the Government of India through FCI and other such agencies as at present,” adding that “the procurement by Arthiyas may also continue as earlier.”
The above resolution exposed that there is no interest of small farmers in the minds of the political class in Punjab. They want to protect, nurture and support the exploiters of farmers. In Punjab, farmers remained poor but these Arthiyas became the richest community in Punjab. That is there is so much resistance for change and protest against new laws.
Farmers should ask the following questions to the political leaders of the Punjab:
Why the political class of Punjab is supporting “the procurement by Arthiyas may also continue by FCI as earlier.” and not advocating farmers groups like cooperatives, FPOs etc.
Why so-called protesting farmer leaders are not objecting to this resolution and not demanding let farmer bodies be empowered for procurement for FCI.
What steps Punjab is taking to reduce the commission and taxes in APMCs? When other states can manage their APMC in 1 to 2 per cent, why Punjab has to charge an 8.5% commission to taxpayers via FCI. Is this not the official exploitation of taxpayers funds by Punjab State?
Another Resolution passed by all-party meeting: The resolution demanded withdrawal of the new Environment Protection (Amendment) Act, 2020, while urging the Centre to drop the proposal to enact the proposed new Electricity (Amendment) Act, 2020.
This also clearly shows that the irrespirable thinking, dirty political design and irresponsible act of the political class of Punjab. They have no respect for natural resources and the environment. These laws are passed after Supreme Court orders and the repeated cries of responsible citizens in Punjab that due to depleting water tables in Punjab which will ruin the future generations of Punjab forever. The current political class is only keen to push their political agenda at the cost of the future of Punjab, short term politics and at the cost of taxpayers money.
The question is why there is no word on how to save depleting soil health and water tables and how to protect small farmers from these depleting natural resources. This clearly shows that the political class of Punjab have no interest in small farmers.
Punjab political leadership is the source of problems and not keen to address the man-made crisis in Punjab but asking taxpayers of India to fund their misadventures and political agenda and help them in keeping their political powers.
It is very clear that farmers of Punjab are in crisis and their income is stagnating because their political leaders and commission agents turned farmer leaders have no interest in small farmers welfare but are keen to enrich themselves and keen to retain political power.
The way forward:
The whole country is with Punjab. Farmers of Punjab have to decide about their political leadership about a better economic future. Farmers of Punjab need a sensible leadership who can plan and give the direction to Punjab for a glorious and prosperous future. Either current leadership should be forced to change their way of thinking and working or they have to replace the political leaders and people in power centres with a more sensible and responsive leadership for a better future of Punjab.
I am hopeful Punjab farmers will adopt a new and better growth path for their own welfare.
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